Search engines do not read the text in images and do not reliably read JavaScript navigation and Flash files. Presenting non-readable content to search spiders is a fundamental error that must always be avoided, even at the expense of a website's appearance. Google Webmaster Guidelines dictate:
"Make a site with a clear hierarchy and text links. Every page should be reachable from at least one static text link. Try to use text instead of images to display important names, content, or links. The Google crawler doesn't recognize text contained in images. If you must use images for textual content, consider using the "ALT" attribute to include a few words of descriptive text."
Despite the clear logic and strong dictates of this rule, this is an area where uninformed web designers can often undermine their clients' rankings. Flash-based websites are sometimes the worst offenders because they often incorporate almost no text that can...